Foundation raises rental ratio to 145%

Foundation Homeloans has followed Nationwide and will raise its rental calculation for individual applications from 125% to 145% from mid-June.

Limited company buy-to-let products will remain unchanged at 125%.

Simon Bayley, commercial director at Foundation, said: “There is no doubt that with the new restrictions on tax relief which landlords can claim back and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to buy-to-let at this point.

“Intermediaries and their landlord clients are recognising the efficacy of a limited company option and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.”

Bayley said the decision was made as Foundation Home Loans supports the regulator’s intervention to enhance the way that individual landlords are protected by a more rigourous affordability system.

He added: “As a responsible lender, we have heeded the regulator’s calls on affordability and stress testing.

“But we also recognise that experienced landlords are more than capable of assessing risks surrounding exposure to repayment of a loan in the event of rental shortfall.”